Nonferrous

If anyone was expecting a more subdued market for nonferrous metals in the next year, he or she may be in for a surprise, at least according to a number of speakers at the Institute of Scrap Recycling Industries Inc. (ISRI) Commodities Roundtable Forum, which was held in mid-September in the Chicago metropolitan area.

During a discussion about the aluminum market, Bill Peluchiwski, a managing director in the Chicago office of the investment banking firm of Houlihan Lokey, said sluggish housing and construction markets in the United States would result in softer demand for aluminum, which could add to the excess supply on the market. He also said the Chinese market would have a significant effect on the U.S. aluminum market in 2008.

Blair Stewart with J.W. Aluminum, an aluminum rolling company based in Mount Holly, S.C., said, "Nothing is in balance." He added that pricing was extremely volatile, and that while Chinese production was up 30 percent, consumption had climbed by 50 percent. "From an intuitive point, everything seems out of whack," he said.

Peluchiwski noted that he felt China could curb its aluminum consumption.

Peluchiwski, taking a longer view of the aluminum market, said a sizable amount of new capacity was being built, not only in China, but also in Europe and the Middle East.

While Chinese consumers would like to see aluminum prices decline, with all the new capacity and demand coming online, he said, the Chinese would be less likely to be able to lower prices.

Michael Mahan, with aluminum die casting supplier J.L. French of Sheboygan, Wis., also pointed out the role that large funds have had on the aluminum market. "I think the fund intervention is a big impact on the market, especially on traditional values. Most recently some funds had to close out some margin issues," he said.

"I also think the whole sub-prime complex and what the [Federal Reserve] does and even the slower demand for mill products has had an impact on markets."

Stewart said his company has seen a shift in the run-up of aluminum prices. "The domestic situation has gone to a surplus," he said, noting that the United States is typically an import market, but mill restarts had made shipments easier. He added that recent numbers had shown that aluminum production had increased by approximately 18 percent.

Speakers also expressed uncertainty about the market for copper in 2008. Similar to many of the concerns expressed with aluminum, speakers noted the negative impact that the sub-prime market would have on copper markets.

While the housing market in the United States has been negatively affected by the debacle with sub-prime loans, the same forces also could have an impact overseas, especially in China.

John Mothersole, an analyst with Global Insight, said many of the "yellow flags" surrounding sub-prime loans that had been seen in the U.S. market now had begun to appear in China.

John Gross, with Scott Brass of Cranston, R.I., expressed pessimism toward the overall copper market. While he noted there was a 300,000-ton deficit for the material globally, he said there was a sense that there was far more copper being held in inventory in China than had been reported.

Mothersole said that during the past 18 months there had been an erosion of the copper share in the market. "I expect slower consumption growth for a balanced market," he said. "Prices will come down over the next couple of years."

While Mothersole said he felt that Chinese purchases of copper would still show growth, markets were pretty soft outside of the country. At the same time, supplies of both secondary and primary copper were increasing.

The ISRI Commodities Roundtable Forum took place from Sept. 18 to Sept. 20 at the Hyatt Regency O’Hare in Rosemont, Ill. For additional news items from the forum, visit www.RecyclingToday.com.

(Additional news about nonferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com.)